Transcripts For CNBC Squawk On The Street 20140226 : vimarsa

CNBC Squawk On The Street February 26, 2014

Street despite the impact from the Massive Customer data breach which shaved two Cents Per Share of earnings and cut into sales. Andics inned Quarterly Results from a slew of other retailers that includes lowes, dollar tree, tjx and Abercrombie Fitch and barnes noble. And dream Works Animation down sharply in the premarket after posting Fourth Quarter results that were below expectations but well begin with target, reporting betterthanexpected Fourth Quarter results but saying the massive data breach shaved two cents a share off of earnings and comps down 2. 5 in the period but Gregg Steinhafel said sales trends have improved and u. S. Comes down 2. 5 . I know you were tweeting early about not just what the quarter would mean but the yield at this point and so forth. I have to tell you when i look at target, i expected them to miss the miss. Were happy with minus 2. 5 and the answer is, yes, we are, because a lot of people felt there had to be a sudden dropoff, the comeback is being viewed well. The other thing you have to it yields free. Gross stock that yields three. You have to start thinking how much lower can it go and the answer is i dont know, probably not that much more. Macys and walmart in the last couple of weeks kripet s optimistic shopping patterns, i dont know if it will translate to a significant change but you have the anniversary of the payroll tax increase and the sequester not far away, theres hope that youll get more Economic Activity translating into more Consumer Spending although were not sure how that will play out because we have this potentially seminal in the way people shop. We had a big increase in the value of homes and macys talks about how furniture was very strong. I mean, there are lots of people who are still putting money in homes. And that seems to be the trend that a lot of these retailers have been talking about. Remember, target has a nice home business. People are spending on their homes. They are. Now, targets q1 profit views a little below consennious aconsenn io consennsus, and they dont know what the data breach will cost them down the road. What is your game plan on target . I think the yield will hold it down. Its so funny do you know what weve got this interesting market thats the opposite of how skeptical we were coming in about retail. Lowes goes up yesterday on home deem poe doing well. Low they give us a good number and it goes up again today. Thats typically not been the pattern. Theres a forgiveness pattern and then a pat on the back pattern and i think its weve decided, do you know what, lets not be too critical on this group anymore but tjx which is the Charitable Trust name i own is down today. The shakeup would be okay. But if you look at macys what they say there werent a lot of markdowns, when you hear that that means no a lot of dumpoff of merchandise and Gross Margins are good and thats the case. Because they manage their inventories well. As did abercrombie did. The longerterm, Bigger Picture which, by the way, an interesting journal story about target and Procter Gamble in something of a dispute. A lot of this is past tense but it had to do with Procter Gamble allowing amazon access directly into its warehouses so it could ship diapers and the like directly from the customers to a Fulfillment Center and the customer and target retaliated not giving p g products as much prominence in the stores. Isnt this the bigger issue over the long term . Can they expect to grow when they are facing competitors like amazon and zulily. Cramer loves them no matter what, yeah, five. David has a great point. If you go over the macys quarter which i think was a seminal quarter because everyone thought the stock would be down, they are talking power over suppliers. They are dictating terms and talking about technology. Frank blake throughout the home depot quarter talking about technology. Blinds. Com talking about the dotcom, we read this, these companies that have harn the bricks and Mortars Companies that harnessed the web are doing quite well. Target is not, 2 . And amazon managed their web until 2011, managed their online. Look, if you thats not a good scene. What is getting rewarded with new highs are Companies Like macys has this mom initiative, a lot of it involving getting the merchandise to the store that needs the store, using the web, picking it up, same day. Macys has got a lot of technology to it. Home depot, i mean, frank blake is not growing that store base, hes growing the technology within the store, getting more money off of each good he sells. As you said yesterday only one store opening all year long. A couple in mexico. Lowes 31 cents did meet and comps up three nine, and beginning to close the gap between the comes they are posting and home depot is posting. I know. Last quarter was the opposite. These companies are doing very well and, again, i come back to the value of housing. When we were talking to schiller yesterday, you would think youre still getting housing going up not at that same trajectory but lowes is a beneficiary. Both companies are doing well. Theres a moment in the home depot Conference Call where you talk about are you still killing the other guys . And theres a pickup, remember, there are still little guys in hardware. I still want to know is sears continuing to lose share. What do you think the answer is to that . Yes. You mentioned abercrombie, 1. 34 does beat 1. 03 and they see high singledigit comps down for the remainder of the quarter. And low doubledigit decline. Again, this is this pattern were seeing could have been worse thats the pattern . I saw abercrombie, and i thought holy cow, theyre not down double digits, look at they are not giving away merchandise. They bought back stock. We lowered expectations for this group so below the rest of the market that were happy with anybody even getting someone in the store. You mentioned tjx which by the way i think was a miss by a penny. I havent seen the numbers on that. They do not miss so this will be regarded as something unless they explain on the Conference Call why they didnt deliver and this is, again, you talk about the good ones, my Charitable Trust owns, we sold a little bit, but obviously not enough. If retail is doing better and they are not dumping merchandise then tjx does poorly. If retail is doing better i shouldnt say poorly, but not as well as expected. Then dollar tree doesnt do as well. 1. 02 and misses 1. 05 and low Single Digits. A lot of confusion out there. If things are as bad as some people would judge from the employment numbers dollar tree should be going up and not down. Still continue to get that chatter of consolidation amongst the dollar stores. Ive mentioned it many times here. Weve seen no evidence per se and ive reported theres no conversations that im aware of at least between advisers certainly and nonetheless Family Dollar is the one that figures most prominently in that. It will be interesting when we do get that what will it mean overall to the sector. Well, california has still been underdollared. And Dollar General. And Dollar General has been such that was one of the great private equity stories of alltime. It was a good one for kkr. And theyve had their share of good ones. You mentioned apparel, jim, wells takes ralph lauren to an outperform and price target goes up from 186 to 197. They said theyve invested a lot and margin pressure eases up a bit. One of the Great Stories over the last, lets say, two quarters reacceleration of europe and they say that Ralph Laurens going to do that. Obviously kors mentioned, kors mentioned so lovingly on the macys quarter, by the way. Kors was the sign that europe, when they did that great double digit number that europes pretty good. You have to go back and say who does europe pretty good, pvh does and vf corp came right back. They do europe so well. Its positive in this market, its a change. Its a definite change but you have worries about asia and emerging markets. David, teslas up again. I tweeted yesterday the big upgrade from Morgan Stanley and then come suconsumer reports them the best car in the world and what does elon musk find 100 dollar bills on the sidewalk . Ive said skeptical things about tesla and i think i have to go get a bodyguard. I used the term skeptical. I didnt say short it. I said im a skeptic. And ive changed the route that i go home. But that can typically be a sign that perhaps things are getting overvalued. It can be. You get the weve all been there. Weve all gotten the hate mail. Used to actually be real mail come in the mail. Are you on the lookout for a secondary . Are you on the lookout for a purchase . What do you do with this currency . They have cash. Musk, that when he issued that release, it did have every box checked that was a nightmare for the short sellers. It did. It did. Everything. But why not raise more if you can raise, why not raise more . Raise. You know, it will be positive. Theyll file for a secondary and it will be a positive. Theyre going to have even more money to spend on on replacing the electricity grid or whatever. Ive can pondering over lets go back to the netflix situation. Did what was the size of the check that comcast wrote netflix . I do not it was the other way around. Although we dont know how large it was. We know they might have saved money. But the fact is that we dont know and yet we still take it up. Again, skepticism on netflix, ill change the route and ill take the ftrain instead of the gtrain, you wont find me, im expressing skepticism. We dont what whatsapp revenue number is we dont know how many kindles amazon sold. It doesnt matter. Its power. When we come back this morning a busy day. A nightmare for dreamWorks Animation, a poor performance of the movie turboplaying a role in the weakerthanexpected results. And also ahead marijuana and money, meet an executive whose Company Makes an ecigarette product that actually has a twist of weed. And take a look at futures, were trying for the third time to close above our alltime highs on the s p. Well see if todays the day when squawk on the street comes right back. Orbiting the moon in 1971. [ male announcer ] once its earned, usaa Auto Insurance is often handed down from generation to generation. Because it offers a superior level of protection. 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When you look at the disney quarter what stands out versus the dreamworks quarter is hit, hit, hit, dead away from the notion maybe it will be big, maybe it wont be. Disney goes from 65 to 80 because of the predictability of franchises. This is unpredictable and thats right. They are trying to change the revenue makeup of the company. Julia boorstin a couple of days ago before the earnings, by the way, spoke with Jeffrey Katzenberg talking about the various initiatives they have to diversify the revenue base theme park rides and other areas that they can derive a profit from the franchises theyve created and, you know, he had films going down to as low i think it was 30, 40 overtime but right now its all about the movies still and its not gone that well. This is perennial take overcandidate that has never actually been taken out. Everybodys look. The viacoms and disneys that level . Yeah. Sony . You walk by katzenberg on the sidewalk. It does bring to mind disney which raised ticket prices, again, i think for the second time in nine months, record highs. Today on Good Morning America it was a big frozen singalong as that movie has made almost a billion dollars. I went to the movie theater, and there were two frozens and i havent sung along with a movie since the rocky horror picture show. This franchise is exproceeded i exploding. Ive seen the picture six times. From start to finish. Six. And well, i got to tell you, this is one ive been talking about it on mad money, the younger people if you listen to younger people you are making a lot more money than if you listen to older people. Older people are buying General Electric my Charitable Trust buys General Electric. It yields 3 . Why do you own it . Because i think the restructuring will be very good to buy back the financial. You dont sing with it. Not anymore. I like the oil service business. And you believe those businesses at General Electric are better off together than they would be perhaps separated . Is there more value if you break it up . I think you dont need health care under the same roof as oil service, as appliances, if they want they can do a big move. And Magnetic Resonance imaging machine, it all belongs together . I think there is hidden value but theres also the possibility of more cash flow generation and if i can understand the Company Without the finance business i think its going to get the same kind of multiple that maybe you would get from an eaton had is a very good company. It has made progress on those margin promises even though theyve been a long time coming. But this is the twotrack market which i keep talking about. I listened to the jpmorgan conference, its a good analyst day. The stock goes down a dollar immediately. But then i looked a linkedin, they talked about china on monday. They talk about china on tuesday. Well, lets keep taking it up. Id like to see new information as reasons to take stocks up not the same information. Yeah. Thats one of my concerns. David, i see you are reading paper. Im reading another icahn letter. You know, its funny when jeff bezos started amazon, he thought about naming the company relentless. Carl icahn needs to call himself relentless, when you are up against mr. Icahn, you can expect it will not end. You can beat him. Clorox did, apple most recently, well see if ebay, whether they are capable of withstanding him. The latest letter follows the one we told you about on monday morning questioning the independence, if you will, of two key directors that we talked about here Marc Andreessen and mr. Cook as well from intuit, founder of intuit. The latest letter doesnt seem to have too much, its a response to ebays response saying simply the disturbing fact is that ebay sold a controlling stake in skype to a sitting board member in silver lake for about 1. 9 billion and a mere 18 months they sold it to microsoft. They did hold 30 but they are talking about the 4 billion gain not going to ebay. Coming back on the same themes im seeing here as i read it while were sitting here, more or less repeating the same ideas. Not a lot new here from icahn but he keeps coming. Did you see this conflict, the cook conflict . The same questioning of the cook conflict was was there from we knew. But hes saying its bigger than we realize. Listen, it may be the doj did get involved. Again, ebay has come out and said its cherry picking old news. They cite the extreme experience of both of these directors who are very much enmeshed in the world of Silicon Valley, certainly mr. Andreessen is. But theres a larger question about andreessen in particular. Hes on the board of facebook. Hes on the board of hp and hes on the board of ebay. And hes got a lot going on. These companies they all want to compete in the end. Right. And, you know, he was on the board of hp when they did autonomy. I dont know. You think he has a point . I kind of think theres a point to be made there. And i know, listen, andreess

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